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The purpose of Beyond Budgeting is to create more agile and more human organizations says Bjarte Bogsnes

January 26, 2018
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Bjarte Bogsnes is the chairman of Beyond Budgeting Roundtable. He has over twenty years of Beyond Budgeting and Balanced Scorecard experience, working in both Finance and HR including 11 years in international leadership roles. He has been heading up two Beyond Budgeting projects, at Borealis and Statoil.Bjarte is also the author of “Implementing Beyond Budgeting – Unlocking the Performance Potential”, where he writes about his implementation experiences.He is also the winner of a Harvard Business Review/McKinsey Management Innovation award.

The Agile India team spoke to Bjarte to understand the Beyond Budgeting movement. Here are some of the insights he shared with us.

Tell us a little about the Beyond Budgeting movement

Beyond Budgeting was actually born a few years before the Agile Manifesto. In the mid-nineties, two UK researchers/authors, Jeremy Hope and Robin Fraser, discovered a handful of European companies that had kicked out the budget (and often much more) in favor of more agile and human ways of managing. They found a number of similarities, not just in what these companies were rebelling against, but also in what they were doing instead. It was obviously not identical, given that there was no Beyond Budgeting yet, and few knew about each other. At the time, I was heading up Finance in Borealis, one of these organizations, where we kicked out the budget in 1995.

The name Beyond Budgeting is actually somewhat misleading. The purpose is not necessarily to get rid of the budget. The purpose is to create agile and more human organizations. This requires a radical change in traditional management, where the budgeting process and the budgeting mindset sits at the core. Hence the name, but it might just as well have been called “Business Agility”. That is why our tag-line is “The adaptive management model”, and that is why six of the twelve Beyond Budgeting principles are about leadership.

How did the Beyond Budgeting movement start?

Hope and Fraser gathered these pioneering companies and some other interested people to write a report about what they had found. The time horizon for it all was one year, and it was meant to be the “final report”. That was twenty years ago. The network has been growing ever since. The European network normally meets in London. Our next Beyond Budgeting roundtable meeting will, however, be held in Stockholm, to honor the Swedish Bank “Handelsbanken”, who is regarded as the Beyond Budgeting pioneer. The bank abolished traditional management, including budgeting, already back in 1970.

What have been the practical difficulties in implementing Beyond Budgeting, given that this approach is radically different from traditional management?

We are often asked why the adoption is slower than for Agile or Lean or other concepts born at the same time. Despite the similarities, there are also some significant differences. Agile was born in software development, Lean was born in manufacturing. They challenged few, if any, of the C-suite beliefs or executive power structures. A CEO or CFO not playing rugby would have no clue about what Scrum was. They only observed better and cheaper projects. Beyond Budgeting, however, has gone straight for the throat of these executive beliefs from day one. Beyond the fear of losing control, many fear they will lose their command-and-control tools.

Another difference is the scope. The twelve Beyond Budgeting principles, six on leadership and six on management processes, basically addresses everything that should be on the agenda of an executive in both these dimensions. I am a big fan of Agile, but there are several management issues where Agile does not have a view, given its birthplace in software development.

Finally, Beyond Budgeting is not a recipe. The twelve principles provide guiding and inspiration, but you won’t find thousands of books and armies of consultants telling you exactly how to implement. That is in my view how it should be, as I don’t like recipes. But it makes implementation more challenging.

What helps is that today, so many organizations are embarking on this journey. This not only creates lots of great practices to learn from but also a curiosity and a gentle peer pressure which was almost non-existing when we started out.

How have organizations benefited from applying Beyond Budgeting?

It obviously varies depending on how far they go, but in general, they tend to do very well. The pioneer Handelsbanken with 800 branches in Europe (no budgets, no targets, lots of autonomy and transparency) has performed better than the average of its competitors every single year since 1972. A business school in Norway studied a hundred banks, where it turned out that the small minority that had skipped budgeting had better profitability.

Can you give us quick glimpse into what you would be covering in your workshop and talk?

I will address the case for change; the many serious problems with traditional management seen from a corporate perspective. I will present the Beyond Budgeting model, and some very fascinating cases. I will also share Statoil’s “Ambition to Action” model. We kicked out the budget back in 2005, in favor of a more agile, continuous and people focused approach.

What are the key takeaways from your workshop/talk? Is it something they can apply immediately to their work?

I would like participants to understand not just the theory, but also take away practical examples of how to get started, based on my own twenty years of experience from leading implementation in large companies.